Research in Accounting Regulation 23 (2011) 34–45

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Research in Accounting Regulation

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The academic community’s participation in global accountingstandard-setting

Robert K. Larson a,⇑, Paul J. Herz b,1

a Department of Accounting, School of Business Administration, University of Dayton, 300 College Park, Dayton, OH 45469-2242, United Statesb Department of Accounting, School of Business Administration, Fort Lewis College, 1000 Rim Drive, Durango, CO 81301-3999, United States

a r t i c l e i n f o a b s t r a c t

Article history:Available online 13 April 2011

1052-0457/$ - see front matter � 2011 Elsevier Ltddoi:10.1016/j.racreg.2011.03.006

⇑ Corresponding author. Tel.: +1 937 229 2497.E-mail addresses: Robert.Larson@notes.udayto

HERZ_P@fortlewis.edu (P.J. Herz).1 Tel.: +1 970 247 7591.

International Financial Reporting Standards (IFRS) are now used in more than 100 coun-tries. In the US, the Securities and Exchange Commission (SEC) is considering a ‘‘Work Plan’’to allow or require US corporations to use IFRS. Considering the rising importance of IFRS,the International Accounting Standards Board (IASB), the SEC, the European Union (EU),and others have called for broader stakeholder participation in the global accounting stan-dard-setting process. Academicians are seen as one group that has the potential to have astrong positive influence in the shaping of accounting standards.

This study investigates the academic community’s participation in the IASB’s standard-setting process through the submission of comment letters for 79 issues. For 55 IASB issues,90 academics and academic organizations (5.8% of all respondents) provided 153 responses(2.7% of total responses). For 24 Draft Interpretations issued by the IASB’s InternationalFinancial Reporting Interpretations Committee (IFRIC), just 17 academics and academicorganizations (4.9% of respondents) provided 20 responses (1.9%).

Overall, Anglo country writers dominated, with Australia, Canada, New Zealand, the Uni-ted Kingdom, and the United States together providing a majority of writers and responses.Non-Anglo EU countries provided about a quarter of the writers and responses. While aca-demic interest increased for a few issues, usually discussion papers and substantive issues,the overall response rate remained low. Possible reasons for low participation rates are dis-cussed, as well as some changes that may increase academic engagement with the IASB’sstandard-setting process.

� 2011 Elsevier Ltd. All rights reserved.

Introduction

The International Accounting Standards Board (IASB) iswidely recognized as the leader in converging interna-tional accounting and financial reporting standards. Insome form, the IASB’s International Financial ReportingStandards (IFRS) are either required or allowed in over100 countries (Deloitte, 2009). The European Union (EU)requires all EU companies listed on EU stock exchanges

. All rights reserved.

n.edu (R.K. Larson),

to report their consolidated financial statements usingIFRS. The US Securities and Exchange Commission (SEC) al-ready allows non-US registrants to file financial statementsusing IFRS without having to reconcile to US Generally Ac-cepted Accounting Principles (GAAP), and is now consider-ing a ‘‘Work Plan’’ to allow or require US registrants to useIFRS. With the rising importance of IFRS, the IASB, the SEC,the EU, and others desire to increase the participation inthe global accounting standard-setting process from awide variety of stakeholders.

Academicians are a group seen as having the potentialto have a strong positive influence in the shaping ofaccounting standards. There have been numerous callsfor many years for academics to be more involved with

R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45 35

the Financial Accounting Standards Board (FASB) (Beres-ford, 1991; Beresford & Johnson, 1995; Burton & Sack,1990; Leisenring & Johnson, 1994; Schipper, 1994). ‘‘Stan-dard setters face tough, interesting issues and look to aca-demics for help in addressing them’’ (Barth, 2000, p. 26).

US academics have also been called to engagement withIFRS via SEC consideration of IFRS and the writing of com-ment letters to the IASB (Buttell, 2009; Meek & Thomas,2004; Pownall & Schipper, 1999; Schipper, 2000; Street &Linthicum, 2007). For as Street and Behn (2004, p. xv)wrote regarding an IASB issue, ‘‘The academic communityshould let our voices be heard . . .’’ This exploratory studyexamines academic comment letter writing in the account-ing standard-setting due process of the IASB, including itsinterpretation committee, the International FinancialReporting Interpretations Committee (IFRIC).

Academic participation is low. For the 55 IASB issues, 90academics and their organizations (5.8% of the 1565respondents) provided 153 responses (2.7% out of the5702 responses). For the 24 IFRIC issues, just 17 academicsand academic organizations (4.9% of the 347 respondents)provided 20 responses (1.9% of the 1058 responses). Aca-demic participation is even lower considering that threeacademics and one academic organization provided 42(24%) of the 173 academic responses.

Non-Anglo EU countries provided 26% of responses andin recent years represent a much larger percentage, butAnglo country responses overall dominated, particularlythose from Australia (9%), New Zealand (19%), the UnitedKingdom (UK) (13%), and the United States (US) (9%). Aca-demic interest did not increase over time. Rather, certainaccounting issues generated increased academic interest;for example, two share-based payment issues caused 15%of all academic responses and two small and medium-sized entities (SMEs) issues produced 16% of theirresponses.

The next section explores desired and actual academicparticipation in the standard-setting process. Then the re-search questions, methodology, and results are presented.Next, the paper notes some recent changes that might in-crease future academic engagement with the IASB. The pa-per ends with conclusions and study limitations.

Academic participation in standard-setting

Key stakeholders regularly identified in the accountingstandard-setting process both in the US and internationallyinclude public accounting firms, professional accountancybodies, preparers (corporations and other businesses),and users (such as financial analysts) (Benston, Bromwich,Litan, & Wagenhofer, 2006; Kwok, 1999; Miller, Redding, &Bahnson, 1998; Radebaugh & Gray, 1997; Zimmermann,Werner, & Volmer, 2008). Many studies examine participa-tion by these stakeholders in national accounting stan-dard-setting, and to a lesser extent with the IASB and itspredecessor organization, the International AccountingStandards Committee (IASC) (Howieson, 2009; Jorissen,Lybaert, & Van de Poel, 2006; Kwok, 1999; Larson, 2007;Laughlin, 2007; McLeay, Ordelheide, & Young, 2000; Walk-er & Robinson, 1993; Watts & Zimmerman, 1986). How-

ever, few studies investigate academic participation, andnone focus on it in regards to the IASB. This section reviewscalls for academic engagement and studies of actual aca-demic participation through comment letter writing.

Calls for academic participation

For many years in the US and more recently in interna-tional arenas, there have been calls for academics to bemore engaged in the accounting standard-setting process,especially as researchers of relevant issues and as com-ment letter writers. Many calls for academic participationfocus on the FASB and the SEC. During the 1990s, Beresfordand Johnson (1995, p. 116), both then at the FASB, boldlystated the importance of academic engagement with theFASB, ‘‘the involvement of the academic community isessential if our activities are to be as effective as possible.’’Both specifically requested that the academic communityparticipate by writing comment letters (Beresford, 1991;Beresford & Johnson, 1995). There have been numerousother calls for academics to be more involved in the stan-dard-setting process of the FASB (Burton & Sack, 1990; Lei-senring & Johnson, 1994; Schipper, 1994; Wyatt, 1990,1991). Lack of participation by academics is seen as detri-mental to the legitimacy of accounting standard-settingbecause it allows interest groups that do write commentletters to have more influence that sometimes leads togreater politicization of the process (Wyatt, 1990, 1991).

Relevant accounting research is also very helpful, andSchipper (1994, p. 67) notes that there are stages in thedue process where an ‘‘academic researcher can have a po-sitive impact.’’ Mary Barth, a Stanford University academicwho was a part time IASB member until 2009, holds that‘‘research is particularly valuable to standard setters be-cause it is unbiased, rigorously crafted, and grounded ineconomic theory, as is the conceptual framework’’ (Barth,2007, p. 14). ‘‘There is demand for more academic researchthat provides insights into questions of interest to account-ing standard setters . . .’’ (Barth, 2000, p. 26). Academics areseen as being in a somewhat unique position, ‘‘becauseacademics do not have a stake in the outcome of the re-search, research is typically unbiased’’ (Barth, 2007, p. 7).

The importance of academic research to the SEC is alsonoted, particularly regarding the possible use of IFRS in theUS (Buttell, 2009; Meek & Thomas, 2004; Pownall & Schip-per, 1999; Schipper, 2000). The SEC regularly cites aca-demic research in speeches, studies, and final rules, andit helps ‘‘the SEC find objective, independent, empiricaldata to determine and support the most appropriate posi-tion to be taken by the SEC’’ (Jorgensen, Linthicum, McLel-land, Taylor, & Yohn, 2007, p. 320).

US academics were recently urged to write commentsletters to the SEC in the current US debate over whetherto adopt IFRS. ‘‘As academics, we share a responsibility tocarefully evaluate every dimension of the SEC’s IFRS Com-ment Release . . . The SEC’s invitation to comment presentsan excellent opportunity for academics to bring our re-search and expertise to bear in shaping the future of U.S.GAAP and IFRS’’ (Street & Linthicum, 2007, p. xvi).

The IASC Foundation (IASCF), the organization that con-trols the IASB, desires academics involvement in the due

36 R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45

process of the IASB and IFRIC, including participationthrough comment letters (IASCF, 2005). Academics can beimportant participants as the IASB grapples with manykey issues (Barth, 2006). Further, there have been callsfor academics to write comment letters to the IASCF tosupport the continued appointment of academics to posi-tions on the IASB and the Trustees of the IASCF (Street &Behn, 2004). Barth previously served on the IASB, andnow serves as a special advisor to it. A former academic,Paul Pacter, began a term on the IASB in 2010. People withsignificant academic experience have regularly served onIFRIC (Junichi Akiyama, Japan, 2001–2005; Michael Brad-bury, New Zealand, 2003–2008; Sara York Kenny, US,2006–present; Leo van der Tas, The Netherlands, 2001–2006; Patricia Doran Walters, US, 2001–2006).

A common theme through the literature is that academicparticipation includes both the research of relevant topicsand the writing of comment letters, which may include theclear communication of research findings to standard-set-ters. This is important because, as Leisenring and Johnson(1994, p. 75) note, practitioners, including standard-setters,by and large ‘‘do not and cannot understand much of aca-demic research.’’ However, researchers can help ‘‘familiar-ize’’ standard-setters with research findings (Schipper,1994, p. 70). One way to do that is through comment letters.This input is deemed important because academics presenta more conceptually pure and unbiased lobbying position instandard-setting, for the outcome does not affect them in thesame way as other stakeholders (Barth, 2008).

Prior research on actual academic participation

Research on academic comment letter writing to theFASB indicates a low level of participation. Mezias andChung’s (1989) analysis of 30 random FASB issues foundthat the mean academic response was just under two let-ters, and that academics wrote less than 2% of all letters re-ceived. Tandy and Wilburn (1992, 1996) found thatacademics provided an average of three to five letters perissue during FASB’s first 20 years and accounted for 2.5%to 2.7% of all responses. They found that only 4.1% ofaccounting academics ever wrote to FASB in regards to148 issues between 1973 and 1992. Their survey foundthat many academics do not participate in standard-set-ting because of a perceived low probability of success.

In contrast, a study of German accounting standard-set-ting found a high level of academic participation, a leveleven higher than the audit profession (McLeay et al.,2000). In their responses, German academics discussed 83of the 169 proposals identified for the adoption of the Euro-pean Fourth Directive concerning accounting into Germanlaw for domestic financial reporting. While academicswhen alone in their views exerted relatively little influence,the study found academics exerted significant influencewhen working together in conjunction with other groups.

Little research examines academics in the submission ofcomment letters to the IASB or the IASC. Kenny and Larson(1995) found that only five academics (2.1% of 233 writers)wrote 10 letters (1.3% of 764 letters) to the IASC regarding14 issues between 1989 and 1992. Americans were four ofthe writers and wrote nine of the letters, with Robert

Anthony writing five of them. Academics wrote less thanone letter per IASC issue.

Larson (2002) found even lower academic participationin his examination of comment letter submissions to theIASC’s Standing Interpretations Committee (SIC) from1997 to 2000. Just two academics (2.5% of 81 writers)wrote five letters (.9% of 576 letters) in response to 23SIC issues. Michael Bradbury (New Zealand) wrote four ofthe five letters.

Jorissen et al. (2006) examines comment letters submit-ted directly to the IASB in regards to a large number of is-sues. They find 36 letters from academics for 23 early IASBissues, but did no further analysis of academicsubmissions.

Larson (2007) examined comment letter submissionsfor IFRIC’s first 18 issues and found six letters from fouracademic institutions. However, his focus was not on aca-demics, and he defined academe narrowly–joint responsesfrom multiple academics at the same institution were trea-ted as one response, and academic associations were notincluded in his academic category.

In sum, academic participation and research on it hasbeen meager. Existing literature specifically addressing aca-demic participation focuses almost exclusively on domesticstandard-setting in the US. However, as stated by McLeayet al. (2000, p. 83), there is little evidence to support anassertion that prior findings ‘‘in English-speaking coun-tries. . .will hold irrespective of the institutional settingwith which accounting regulations are developed.’’ Further,in regards to the IASB, while two studies briefly mentionacademic responses, neither focus on the particulars of aca-demic comment letter writing to the IASB or IFRIC.

Research questions

The IASB desires input from a variety of stakeholderinterest groups, including academics (IASCF, 2005; Nicola-isen, 2005). Such participation lends to the IASB’s legiti-macy as an international standard-setter (Durocher,Fortin, & Cote, 2007; Larson, 2007). While geographic par-ticipation with the IASB has varied considerably (Jorissenet al., 2006; Larson, 2007), the IASB desires and needsinteraction with constituents from the entire world (IASCF,2005; Nicolaisen, 2005; Tweedie & Seidenstein, 2005).While academic participation has not generally been sig-nificant in accounting standard-setting, one study in conti-nental Europe notes a high degree of participation andinfluence (McLeay et al., 2000). Partly following Tandyand Wilburn’s (1996) approach, this study asks four re-search questions.

Research Question 1 (RQ1): Did academics write com-ment letters to the IASB?Research Question 2 (RQ2): Did certain countries orregions originate most of the comment letters by aca-demics to the IASB?Research Question 3 (RQ3): Did the frequency of com-ment letters by academics to the IASB vary with thenature of the issue?Research Question 4 (RQ4): Did comment letter writingby academics to the IASB increase over time?

R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45 37

Sample and methodology

While individuals and organizations may influence thedevelopment of accounting standards in many differentways (Durocher et al., 2007; Walker & Robinson, 1993), thispaper explores academic participation in the IASB’s stan-dard-setting process by examining letters sent in responseto IASB and IFRIC requests for comment on various issues.

Comment letters from 2001 through 2008 are examinedfor 55 IASB issues and for 24 IFRIC Draft Interpretations(DIs). Comment letters were obtained from the IASB’s web-site. The 55 IASB issues generated 5702 responses, whilethe 24 IFRIC DIs had 1058 responses. The response totalfor some issues differs from IASB totals because a physicalletter with multiple signatories is treated as multiple re-sponses in the main part of this study’s analysis. This isdone to identify all academics that sent comment letters.Totals here also do not include letters the IASB kept confi-dential. Data on respondents was obtained from the com-ment letters, respondents’ websites, websites oforganizations associated with respondents, Hasselback(2002, 2004, 2006, 2008), and Hoover’s Online.

Respondents were considered to be academics if: (1) aperson’s primary employment was as a researcher orinstructor at a college or university, including groups ofstudents led by faculty in a response, or (2) an organizationwas primarily composed of academics, such as the Ameri-can Accounting Association (AAA), which while dominatedby academics also encourages accounting practitioners tojoin. Those with PhD’s (and equivalent) that worked pri-marily for private business, public accounting firms, orgovernment when the letter was written were excluded.Those teaching part-time with full-time consulting orother occupations were also excluded. Retired faculty aretreated as academics.

The names and organizations associated with all 6760comment letter respondents for the 79 issues had to beindividually examined. Most respondents were fairly easilyidentified as academics, professional accountancy bodies,corporations, financial institutions, trade associations,and such. A large number of respondents, mostly individ-ual names, however, were not tied to any organization onthe comment letters and required further investigation.In these cases, extensive online searches were done usingthe names of organizations, individuals, addresses given,etc. to determine affiliation. Hasselback was checked todetermine or verify academic affiliation when a commentletter was written. Although this thorough search identi-fied several additional academics, most individual namesturned out to be high-level employees of corporationsand public accounting firms.2

2 The careful examination of letters, the broader definition of academicparticipation, and the diligent efforts to identify the affiliations of individ-uals resulted in finding a higher level of participation from academe thanreported by Jorissen et al. (2006) or Larson (2007). Unlike some earlierstudies, here letters from one university with multiple signatories weretreated as multiple responses. The goal was to find out how many differentacademics participated in writing letters. All academic identities werecarefully checked, but Schiebel (2008) is relied upon to identify the sole SriLankan academic. Only 25 writers responsible for 26 letters sent to the IASBcould not be clearly identified and categorized.

Results

Overview of responses

There were a total of 6760 responses from a wide diver-sity of stakeholders addressing the 79 different issues. Aca-demics accounted for 3% of responses. The most responses(43%) came from accounting organizations, which includedaccounting standard-setters (15%), public accounting firms(8%), IFAC members (all are professional accountancybodies) (16%), and other accounting (4%). Business andbusiness-related organizations accounted for 41% of re-sponses; 25% were from nonfinancial corporations, nonfi-nancial private businesses, and their trade associations,and 16% were from financial service corporations, privatefinancial service businesses, and their trade associations.Other groups contributing responses were cooperatives,mutuals, and their trade associations (3%), various govern-ment organizations (3%), and other organizations (7%). Theother category contains many disparate interest groups,including actuaries, development organizations, financialanalysts, lawyers, nonprofit organizations, and securitiesregulators.

RQ1 asks if academics wrote comment letters to theIASB. For the 55 IASB issues, 90 academics and academicorganizations (out of 1565 writers) provided 153 re-sponses (2.7% of total responses) (see Table 1, panel A).For the 24 IFRIC issues, just 17 academics and academicorganizations (out of 347 writers) provided 20 responses(1.9% of total responses) (see Table 1, panel B). In total, aca-demic participation was low and accounted for only 96writers and 173 responses (2.6% of total responses). Thisis similar to the rates of 2.5% (Tandy & Wilburn, 1992)and 2.7% (Tandy & Wilburn, 1996) found in the US. How-ever, this academic response rate is higher than found forthe IASC (1.3%) (Kenny & Larson, 1995) and the SIC (.9%)(Larson, 2002).

For all 79 issues, 137 responses were generated by 96academics and academic organizations (see Table 2).Nineteen of the letters by academics were jointly written,i.e., had at least two signatories. Except for three jointletters from faculty at Unitec (New Zealand) that eachhad eight or nine authors, all joint letters had just twoor three signatories. Almost 20% of academic responseswere provided by just three individuals: Ian Langfield-Smith (Australia, 10 letters), Hannu Juhani Schadewitz(Finland, nine letters), and Michael Bradbury (Unitec Uni-versity, eight responses). In a few cases, academics sub-mitted responses developed as part of a studentlearning activity.

Five academic accounting organizations generated 26letters. While the British Accounting Association (oneletter), the Canadian Academic Accounting Associa-tion (one letter), the European Accounting Association(four letters), and the AAA (three letters) respondedand may be better known, the Korea AccountingAssociation was actually the most active writer with 15responses. In addition, five academic-dominated organi-zations, mostly university affiliated centers, provided 10letters.

Table 1Overall and academic response for 79 IASB and IFRIC issues released for public comment.

Panel A. 55 IASB issues released for public comment and the number of comment letters

Date issued Total response Academicresponses

Title

No. %

2001 289 10a 3 Share-based payment – additional comments on Discussion Paper (DP)2001 76 4 5 Preface to IFRS

2002 34 0 – Amendments to IAS 19, employee benefits – the asset ceiling2002 83 0 – Exposure Draft (ED) 1, first-time application of IFRS2002 179 9a 5 Improvements to International Accounting Standards2002 245 16 7 ED 2, Share-based payment2002 237 4 2 Amendments to IAS 32, Financial instruments: disclosure and presentation, and IAS

39, financial instruments: Recognition and measurement2002 139 6 4 ED 3, Business combinations

2003 145 1 1 ED 5, Insurance contracts2003 129 0 – Amendments to IAS 39, ED regarding fair value hedge accounting for a portfolio

hedge of interest rate risk2003 86 0 – ED 4, Disposal of non-current assets and presentation of discontinued operations

2004 73 1 1 ED 6, Exploration for and evaluation of mineral resources2004 64 1 2 Strengthening the IASB’s deliberative process2004 120 3 3 ED Amendments to IAS 39, financial instruments: recognition and measurement: The

fair value option2004 93 2 2 ED Amendments to IAS 19, employee benefits – actuarial gains and losses, group

plans and disclosures2004 77 1 1 ED Amendments to IFRS 3, business combinations – combinations by contract alone

or involving mutual entities2004 113 8 7 DP, Preliminary views on accounting standards for small and medium-sized entities

(SMEs)2004 60 0 – Amendments to IAS 39, Cash flow hedge accounting of forecast intragroup

transactions2004 63 0 – Amendments to IAS 39, Financial guarantee contracts and credit insurance2004 37 0 – Amendments to IAS 39, Transition and initial recognition of financial assets and

financial liabilities2004 107 0 – ED 7, Financial instruments: disclosures

2005 104 2 2 Staff questionnaire on possible modifications of recognition and measurementprinciples in IFRSs for use in IASB standards for SMEs

2005 24 0 – IFRS 6, Exploration for and evaluation of mineral resources, an amendment to IFRS 1,First-time adoption of IFRS

2005 69 0 – Draft memorandum of understanding on the role of accounting standard-setters andtheir relationships with the IASB

2005 129 1 1 Amendments to IAS 37, Provisions contingent liabilities and contingent assets, andIAS 19, Employee benefits

2005 34 1 3 Draft Technical Correction (DTC) 1: amendments to IAS 21, The effects of changes inforeign exchange rates – net investment in a foreign operation

2005 99 3 3 Amendments to IAS 27, consolidated and separate financial statements2005 139 9 6 DP, Management commentary

2006 193 4 2 ED 8, Operating segments2006 89 3 3 DP, Measurement bases for financial reporting – measurement on initial recognition2006 58 1 2 Amendments to IFRS 2, Vesting conditions and cancellations2006 131 3 2 Amendments to IAS 1, presentation of financial statements2006 44 0 – IFRIC Due process handbook2006 92 4 4 ED Amendments to IAS 32 & IAS 1: financial instruments puttable at fair value and

obligations arising on liquidation2006 95 5 5 ED IAS 23, Borrowing costs, amendments2006 154 12 8 DP, Fair value measurement

2007 42 1 2 ED Amendments to IFRS 12007 186 19 10 ED for SMEs, IFRS for private entities2007 74 1 1 ED Amendments to IAS 24, Related party disclosures2007 177 2 1 DP, Preliminary views on insurance contracts2007 120 1 1 Joint ventures, ED 9, joint arrangements (would replace IAS 31)2007 64 0 – ED Amendments to cost of an investment, amendments to IFRS 1 and IAS 272007 76 1 1 ED Amendments to IAS 39 exposures qualifying for hedge accounting2007 78 1 1 Annual improvements 2006–20072007 46 0 – ED Amendments to IFRS 2 and IFRIC 11

2008 166 3 2 Dp: post-employment benefits, including pensions2008 63 1 2 ED Amendments to IAS 33, EPS

38 R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45

Table 1 (continued)

Panel A. 55 IASB issues released for public comment and the number of comment letters

Date issued Total response Academicresponses

Title

No. %

2008 62 1 2 Annual improvements 2008–20092008 99 0 – ED Amendments to IFRS 1, additional exemptions for first-time adopters (including

Oil & Gas)2008 65 1 2 ED Amendment to IFRS 5: non-current assets held for sale and discontinued

operations2008 96 2 2 ED Amendments to IFRS 7: investments in debt instruments2008 91 0 – ED Amendments to IFRS 7: improving disclosures about financial instruments2008 80 2 3 ED Amendments to IAS 24: relationships with the State2008 153 2 1 ED 10 – Consolidation2008 61 1 2 ED on embedded derivatives: amendments to IFRIC 9 & IAS 39

Total 5702 153 3b

As the study wants to determine the extent of academic involvement, joint letters from academics at the same university were treated as separateresponses. Letters kept confidential by the IASB not included in the number of letters submitted.

Panel B. IASB’s IFRIC draft interpretations (DIs) and the number of comment letters

IFRIC No. DI dateissued

Total response Academicresponses

Title

No. %

DI 1 May 2003 40 2 5 Emission rightsDI 2 Sept. 2003 57 10c 18 Changes in decommissioning, restoration and similar liabilitiesDI 3 Jan. 2004 51 0 – Determining whether an arrangement contains a leaseDI 4 Jan. 2004 29 0 – Decommissioning, restoration and environmental rehabilitation fundsDI 5 March

200430 1 3 Applying IAS 29, financial reporting in hyperinflationary economies for the first

timeDI 6 May 2004 52 0 – Multi-employer plansDI 7 June 2004 27 0 – Scope of SIC-12 consolidation-special purpose entitiesDI 8 June 2004 96 1 1 Members’ shares in co-operative entitiesDI 9 July 2004 46 0 – Employee benefit plans with a promised return on contributions or notational

contributionsDI 10 Nov. 2004 21 0 – Liabilities arising from participating in a specific market-waste electrical and

electronic equipmentDI 11 Dec. 2004 33 0 – Changes in contributions to employee share purchase plansJoint D12–14

LettersMarch2005

76 2 3 Service concession arrangements: Actg model; financial asset model; intangibleasset model

DI 15 March2005

31 0 – Service reassessment of embedded derivatives

DI 16 May 2005 39 0 – Scope of IFRS 2DI 17 May 2005 39 0 – Group and treasury share transactionsDI 18 Jan. 2006 56 1 2 Interim financial reporting and impairmentDI 19 Aug. 2006 47 1 2 IAS 19 – Asset ceiling: availability of economic benefits and minimum funding

requirementsDI 20 Sept. 2006 60 1 2 Customer loyalty programmesDI 21 July 2007 63 0 – Real estate salesDI 22 July 2007 46 0 – Hedges of a net investment in a foreign operationDI 23 Jan. 2008 58 1 2 Distributions of non-cash assets to ownersDI 24 Jan. 2008 61 0 – Customer contributions

Total 1058 20 2d

As the study wants to determine the extent of academic involvement, joint letters from academics were treated as separate responses.a Two letters were sent by eight academics at Unitec Institute of Technology, New Zealand. While each letter had eight respondents, not all individuals

were the same.b Or, more precisely, 2.7%.c One letter was signed by nine academics at Unitec Institute of Technology, New Zealand.d Or, more precisely, 1.9%.

R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45 39

Geographic diversity

RQ2 asks whether certain countries or regions originatemost academic comment letters to the IASB. Just overtwo-dozen countries provided academic writers (see

Table 2). In comparison to IASB comment letter studies thatlooked at all writers and letters, the geographic distributionof academic writers and responses is somewhat different.Academics from English-speaking countries with a traditionof writing to national accounting standard-setters are

Table 2Academic responses to 55 IASB and 24 IFRIC Issues (2001 through 2008).

Country Writers Responses

IASB IFRIC Totala % IASB IFRIC Total %

Europe:EU:Austria 1 1 1 1 2 1 3 2Denmark 2 2 2 2 2 1European Accounting Assn 1 1 1 4 4 2Finlandb 4 4 4 13 13 7Germany 6 2 8 9 8 3 11 6Greece 1 1 1 1 1 1Italy 5 5 5 7 7 4Malta 1 1 1 1 1 1Spain 2 2 2 2 2 1Sweden 1 1 1 1 1 1

Total non-Anglo EU 24 3 26 27 41 4 45 26United Kingdom 17 17 18 22 22 13

Total EU 41 3 43 45 63 4 67 39Switzerland 1 1 1 1 1 1

Total Europe 42 3 44 46 64 4 68 40

Asia–Pacific:Australiac 5 1 6 6 14 1 15 9India 1 1 1 1 1 1Korea, Southd 1 1 1 1 12 3 15 8Malaysia 2 2 2 2 2 1New Zealande 12 10 13 14 24 10 34 19Sri Lanka 1 1 1 1 1 1

Total Asia–Pacific 22 12 24 25 54 14 68 39

Western Hemisphere:Argentina 1 1 1 3 3 1Bahamas 1 1 1 1 1 1Brazil 1 1 1 1 1 1Canada 5 5 5 7 7 4Chile 1 1 1 4 4 2Colombia 2 2 2 2 2 1Uruguay 1 1 1 1 1 1United States of America 14 14 15 16 16 9

Total Western Hemisphere 25 1 26 27 34 1 35 20

Africa:South Africa 1 1 2 2 1 1 2 1

Total 90 17 96 100 153 20 173 100

a IASB plus IFRIC does not equal total because 11 academics/academic organizations responded to both IASB and IFRIC issues.b Hannu Juhani Schadewitz of Turku School of Economics provided nine responses.c Ian Langfield-Smith of Monash University provided 10 responses.d The Korean Accounting Association provided all Korean responses.e Michael Bradbury of Unitec Institute for Technology, then also an IFRIC member, provided eight responses. Three joint letters from faculty at Unitec

created 25 of the New Zealand responses. If the 25 were treated as just three responses, then the reduced 10 New Zealand responses would be just under 7%of total responses.

40 R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45

dominant with Australia (6 writers, 15 letters), Canada (5, 7),New Zealand (13, 34), the UK (17, 22), and the US (14, 16)providing 57% of the writers and 54% of the responses.3 Foracademics, the results support the EU fear that in the stan-dard-setting process the IASB experiences ‘‘dominance bythe English-speaking countries’’ (Whittington, 2008, p. 496).

While increasing over time, non-Anglo countries pro-vided relatively few writers or responses. EU countries,excluding the UK, provided 26 writers (27% of total) and

3 If the three joint letters generating 25 of New Zealand’s responses aretreated as just three, this group still dominates.

45 responses (26% of total). Germany has the largest num-ber of academic participants in this group with eight writ-ers and 11 responses, followed by Finland (four writers, 13responses) and Italy (five writers, seven responses). Thenon-Anglo EU countries with respondents correspondfairly well to Standish’s (2003) subjective assessment thatDenmark, Finland, Germany, the Netherlands, and Swedenhad the highest command of English-language discourseand academic research in accounting in the EU, with Spainrecently rising. The only other country to provide a largenumber of letters was Korea, where the Korea AccountingAssociation wrote fifteen.

4 Responses to DPs and Substantive Issues were not significantlydifferent. Similar results were found when tests were done using thenumber of physical letters submitted by academics.

R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45 41

It is important to note that the domiciles of academicresponses changed over the study period. Taken together,non-Anglo EU countries and Korea provided a majority ofresponses in 2006, 2007, and 2008.

Variation over type of issue

RQ3 asks whether the frequency of academic IASB com-ment letters varied with the nature of the issue. RQ3 wasaddressed two ways. First, academic responses to IFRICwere compared with academic responses to IASB issues(see Table 1, panels A and B). IFRIC is not an urgent issuesgroup that creates new rules, nor does it provide applica-tion or implementation guidance. Thus, IFRIC issues forinterpretation are usually much more narrow and techni-cal than IASB issues, which while including amendments,are mostly expansive broad discussion papers (DPs), newtopics, and revisions of significant accounting standards.

Academics generally respond in greater numbers toIASB issues than to IFRIC DIs. Of IFRIC’s 24 DIs, 13 receivedno academic letters, and only one DI got more than twoacademic responses. The academic response rate to IFRICwas 1.9% of total responses versus 2.7% (or almost 50%higher) for IASB issues. The average IFRIC response ratewould only be 1.1% if the joint letter written by nine aca-demics to DI 2 was treated as one response. This low re-sponse to the DIs might be explained by the technicalnature of IFRIC’s interpretation issues whereas the IASBhas a much broader agenda.

While the academic response to the IASB was higher, italso had much more variation. Thirty-eight of the 55 IASBissues have low rates levels: 15 issues had no letters, 17had one letter, and six had two letters (none of which werejoint responses). However, eight issues have much higherresponse rates and account for 60% of all responses to IASBissues. Two SME issues generated 16% of all academic re-sponses: The Exposure Draft (ED) for SMEs, IFRS for PrivateEntities (19 responses, 10% of all responses to that issue)and Preliminary Views on Accounting Standards for SMEs(8, 7%). Two share-based payment issues generated 15%of all academic responses: ED 2, Share-based Payment (16responses, 6% of all responses to that issue), and Share-based Payment – Additional Comments on DP (10, 3%).The other four were unrelated issues: DP, Fair Value Mea-surement (12, 8%), DP, Management Commentary (9, 6%),ED 8, Operating Segments (9, 5%), and Improvements toInternational Accounting Standards (IAS) (9, 5%).

Given the variation in response to IASB issues and in or-der to further test RQ3, the 79 issues were compared afterseparating them into four categories: DPs (these tend todeal with broad and/or important accounting topics andare often issued before significant EDs are proposed), sub-stantive issues (not including DPs), amendments/interpre-tations, and procedural issues (adapted from Tandy andWilburn, 1996; Jorissen et al., 2006). DPs and substantiveissues generated far more responses than amendment/interpretations and procedural issues. The seven DPs gen-erated 47 academic responses (an average of seven re-sponses per DP) and the 12 substantive issues generated50 responses (four per issue), whereas the 56 amendment/interpretations and the four procedural issues averaged

just over one response per issue. Responses to the fourtypes of issues are significantly different (ANOVA, signifi-cant at .01), and while responses to procedural issues andamendments/interpretations are almost identical, multiplecomparisons tests finds that the responses are significantlyhigher for substantive issues (.05) and DPs (.01).4 Academ-ics respond more frequently to DPs and substantive issues,i.e., to those topics more likely to significantly affect finan-cial reporting. Tandy and Wilburn (1996) also found signifi-cantly more academic letters written to substantive issuesthan amendments.

Trends over time

RQ4 asks whether IASB comment letter writing by aca-demics increased over time (see Table 3). Overall, theredoes not appear to be any trend of increased participationby academics over time. For IFRIC, 13 of the 24 DIs receivedno academic comments, and only one received more thantwo responses. The low academic response rate to IFRIC is-sues does not increase over time. In regards to IASB issues,no trend is clearly discernible in terms of either actual re-sponses or academic responses as a percentage of total re-sponses. The response levels for IASB issues actuallydeclined after the first couple years and in 2006 appearedto return to their initial levels. However, in 2007 and2008, except for the ED for SMEs, academic response wasquite low and averaged only about one letter per IASBissue.

Will academic participation increase in the future?

Anecdotal evidence suggests that academic engage-ment with the IASB might increase in the future. Some sug-gest that this should occur automatically given the IASB’shigher profile. Structural changes occurring in academicorganizations may foster more academic comment lettersubmissions to the IASB. For example, the EuropeanAccounting Association has created a Financial ReportingStandards Committee to write comment letters to the IASB.The AAA’s Financial Accounting Standards Committee hasbegun to shift its focus toward international standard-set-ting and has written three letters to the IASB (AAA, 2004a,2004b, 2006). More recently, this AAA committee re-sponded to the SEC call for comments regarding the useof IFRS in the US (AAA, 2008).

The AAA formerly discouraged and effectively prohib-ited its International Accounting Section from respondingto the IASB. A second structural change is that the AAAnow encourages its various subunits to write comment let-ters. As noted above, the AAA’s Financial Accounting Stan-dards Committee responded to the SEC request forcomments regarding use of IFRS in the US (AAA, 2008). Inaddition, the AAA’s Financial Accounting and ReportingSection’s Financial Reporting Policy Committee wrote aseparate letter to the SEC concerning IFRS that AccountingHorizons also published (AAA FARS, 2008).

Table 3Academic responses over time – 55 IASB and 24 IFRIC issues.

Year issued Total number of responsesa Academic responsesa Total number of lettersb Academic lettersb

No. % per Issue No. % per Issue

Panel A. Academic responses over time – 55 IASB issues2001 365 14 3.8 7 358 7 2.0 3.52002 917 35 3.8 6 856 24 2.8 42003 360 1 0.3 0.5 340 1 0.3 0.52004 807 16 2.0 1.5 779 16 2.1 1.52005 598 16 2.7 2.5 556 13 2.3 22006 856 32 3.7 5 806 28 3.5 3.52007 863 26 3.0 3 809 22 2.7 2.52008 936 13 1.4 1.5 884 13 1.5 1.5

Total 5702 153 2.7 3 5388 124 2.3 2.5

Panel B. Academic responses over time – 24 IFRIC draft interpretations (DIs)2003 97 12 12.4 6 88 3 3.4 1.52004 385 2 .5 – 385 2 .5 –2005 185 2 1.1 .5 185 2 1.1 .52006 163 3 1.8 1 162 3 1.9 12007 109 0 – – 96 0 – –2008 119 1 .8 .5 115 1 .9 .5

Total 1058 20 1.9 1 1031 11 1.1 .5

a Each signatory to a comment letter treated as a separate response so to count all participants.b Each physical letter with multiple signatories treated as one letter.

42 R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45

A third change is the growth of grants specificallyawarded to academics for research related to IFRS. Severalprofessional accountancy organizations and others nowprovide grants, probably the largest is sponsored by theInternational Association for Accounting Education and Re-search (IAAER) in collaboration with KPMG (IAAER, 2009).So far, they have sponsored three rounds of grants to in-form ‘‘the IASB decision process’’ that have funded 15 win-ning research teams with up to $25,000 each. These andother grant programs should increase academic engage-ment with the IASB.

However, obstacles to academic participation remain.Reasons that may be relevant to the IASB include a lowexpectation of affecting the standard-setter, few or no aca-demic rewards for writing, and limited time (Beresford &Johnson, 1995; Tandy & Wilburn, 1996). Standish (2003)points out that many cannot engage with the IASB due tothe language barrier. Further, Tsakumis, Campbell, andDoupnik (2009) cite the importance of good translationsas an imperative for the proper use of IFRS in non-Englishspeaking countries.

The IASB’s official language is English. All IFRIC DIs andIASB issues released for public comment are in English andthe IASB does not normally provide translations (IASB,2009).5 Given that the time period for receiving commentletters is usually fairly short, few academics that cannotunderstand English are likely to respond. Almost 60% of re-sponses and about 65% of letter writers are from countrieswhere English is prevalent. Another relevant issue bothStandish and Tandy and Wilburn mention for hindering par-ticipation is that individuals may lack knowledge or exper-tise in the particular issue(s) the standard-setter is

5 While not an official part of the IASB due process, the IASB issued oneED in 2007 and six EDs in 2008 in French. However, no French academicever wrote the IASB a comment letter.

considering. These factors may have discouraged, and maycontinue to discourage, greater academic engagement withthe IASB through the writing of comment letters.

Additional analysis

Further analysis investigated whether the responsefrom a country might be influenced by two factors citedby Standish (2003): (1) English-language competence inthe conceptual discourse of accounting standard-setting(language and communication); and (2) the quality of itsfinancial reporting system in terms of the academic andprofessional accounting communities (professional exper-tise). Data on English language usage in a country was ob-tained from the CIA’s World Factbook. English-languagecompetence was coded 0 or 1, with 1 meaning that Englishwas a major language, an official language, a language usedby the government, elite, commercial, or educated classes,or the country had been an English colony.

Data on the quality financial reporting systems to mea-sure the second variable was obtained for 102 countriesfrom the World Economic Forum’s Global CompetitivenessReport for 2003–2004 (Sala-i-Martin, 2004). The WorldEconomic Forum is most famous for its annual conferencein Davos, Switzerland, and data from their annual reportshas been used in the accounting literature (Black & Carnes,2006). Two variables from it were used: Strength of Audit-ing and Accounting Standards (Q10.27) and Availability ofCompany Financial Information (Q10.25).

Correlations were performed on these three variablesand two measures of academic participation with the IASB(number of responses and number of letter writers). Al-most all variables were correlated at a significance levelof .01 (see Table 4). The only exceptions were the correla-tions between English and both the number of responsesand the number of writers, which was significant at the

Table 4Academic letter writing to the IASB, 2001–2008: correlation with a country’s usage of the English language and the strength of their financial reporting system.

Number ofresponses

Number of letterwriters

Englishlanguage usage

Strength of auditing &accounting rules

Availability of companyfinancial data

Number of responses 1.000Number of letter writers .892** 1.000Use of English language .216* .209* 1.000Strength of auditing and

accounting standards.376** .403** .332** 1.000

Availability of companyfinancial information

.432** .444** .336** .911** 1.000

Data covers 102 countries available from the World Economic Forum (WEF) (Sala-i-Martin, 2004) for the Strength of Auditing and Accounting Standards(Question 10.27) and Availability of Company Financial Information (Question 10.25) variables. WEF measured these two variables on a 1 to 7 scale, where 7was best. The Number of Letter Writers and Number of Responses include writers and responses to all 79 issues examined from 2001 through 2008, butexcludes those from countries without WEF data (Bahamas) and a pan-European organization (the European Accounting Association). English LanguageUsage was coded 0 or 1 (where 1 represented English usage) and was derived from the CIA Factbook.* Significant at the .05 level.** Significant at the .01 level.

R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45 43

.05 level. The results indicate that the quality of a country’sfinancial reporting systems is related to the academic re-sponse from that country. Therefore, response rates mightincrease over time as a country’s financial reporting systemimproves.

The significant correlations between academic partici-pation and language support the concern raised by Stan-dish. If academic comment letter writing is to increasewhere English is not commonly used, then the IASB mayneed to slow down the due process to allow time for trans-lation of its proposals into other major languages. TheInternational Federation of Accountants (IFAC) examinedits due process in the development of International Stan-dards on Auditing (ISAs) and found that several nationalstandard-setters noted that a 90-day comment periodwas not sufficient for comment from jurisdictions wheretranslation is necessary (IFAC, 2006). IFAC now uses a120-day comment period for ISAs. While the IASB now nor-mally uses 120 day comment periods, it had been 90 daysand has been much shorter ‘‘if the matter is exceptionallyurgent.’’ IFRIC typically uses a 60 day comment period. Toincrease the number of comment letters it receives, theIASB may want to consider having a 120-day or longercomment period for both itself and IFRIC.

Alternatively, the IASB could consider providing trans-lations into key languages, as now done by many suprana-tional organizations. The United Nations (UN) publishes allGeneral Assembly resolutions into the UN’s six official lan-guages: Arabic, Chinese, English, French, Russian, andSpanish. The EU currently conducts its internal businessin English, French, and German, and translates all final leg-islative proposals and official documents of the EuropeanParliament into all of the EU’s 23 official languages. TheEU specifically notes that this costly practice is done to in-crease the legitimacy of its due process.

Conclusion

This exploratory paper represents the first in-depthanalysis of comment letter writing by academics to theIASB. Overall, few academics wrote to the IASB and aca-demics generate about 2.6% of the responses. This 2.6% rate

is similar to the 2.7% found by Tandy and Wilburn (1996)with the FASB, though the actual number of academic let-ters written to FASB per issue was much higher. While itdoes not represent the level of academic engagement thatthe IASB says it desires, this response rate is substantiallyhigher than found under the IASC. For 55 IASB issues, aca-demics accounted for 2.7% of total responses, which is dou-ble the 1.3% found under the IASC (Kenny & Larson, 1995).The 1.9% found for IFRIC is again double the .9% rate re-ceived by the SIC (Larson, 2002). In both cases, the numberof letters written per issue by academics more thandoubled.

A majority of academic responses are from just fiveEnglish-speaking countries where a tradition exists forinterested parties to write comment letters to the nationalaccounting standard-setting body (Australia, Canada, NewZealand, UK, US). While academics also responded fromover 20 other countries, only Italy, Finland, Germany, andKorea provided more than four responses. Academicsrespond more to IASB issues rather than to the narrowerIFRIC interpretation issues. Academics also respond signif-icantly more to DPs and substantive issues rather than toamendments/interpretations and procedural issues. Final-ly, although the geographic distribution changes, totalcomment letter writing by academics does not appear toincrease over time.

There are many possible reasons for the low responserate. In the US, prior research suggests that academics of-ten believe their views hold relatively little weight in theaccounting standard-setting process (Tandy & Wilburn,1996). Language barriers in combination with sometimesbrief comment periods may also be hindering academicparticipation from non-English speakers. The correlationresults support Standish’s (2003) suggestion that languagemay be a significant obstacle hindering non-English speak-ers from participating. Operating only in English may hurtthe IASB’s legitimacy as a true global body, or at least mayrestrict those who can regularly comment.

All studies have limitations. Respondents were investi-gated closely before being categorized, but it is possiblethat some writers were misclassified. Future researchcould explore the academic response to more recent issues

44 R.K. Larson, P.J. Herz / Research in Accounting Regulation 23 (2011) 34–45

as well as how response diversity changes as more coun-tries adopt IFRS. Future studies could also ask academicswhy they did or did not respond to IASB calls to comments.

IFRS are already accepted in the US by the SEC for non-USregistrants. With the SEC considering adoption of IFRS for allUS registrants, it becomes more important to better under-stand the IASB’s due process. The role of academics andother interest group stakeholders in the global accountingstandard-setting process needs to be examined in order tobetter assess the legitimacy and resiliency of the IASB.

Acknowledgements

We appreciate the helpful comments of Senior Associ-ate Editor Steve Moehrle, the journal’s anonymous review-ers, and participants at the 2009 Ohio Regional AmericanAccounting Association meeting, particularly Sue Hakaand Julia Grant.

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